Wednesday, 6 September 2017

Asian markets deepen loses; NK crisis continues to weigh

Key Asian indexes ended in red territory on Wednesday, as market participants did not find reasons to become more optimistic about the crisis in the Korean peninsula, while a negative close in Wall Street contributed to the bear market.

Australia ASX-14.90-0.26%5,752.9006:30 GMT - CLOSED

Shanghai Comp+1.07+0.03%3,385.3906:30 GMT - CLOSED

Hang Seng Index-169.48-0.61%27,571.8706:30 GMT - OPEN

Nikkei 225-27.84-0.14%19,357.9706:30 GMT - CLOSED

TSEC 50 Index-69.98-0.66%10,547.8606:30 GMT - CLOSED

Earlier in the day, Australia presented a revision of its second-quarter GDP, with a quarterly increase of 0.8 percent, below an initially estimated 0.9 percent growth rate and a 1.8 percent advance year over year, also down from a forecasted 1.9 percent build.

In Japan, the government said average cash earnings declined in 0.3 percent, against expectations for a 0.5 percent yearly increase in August.

The diplomatic tension in the Korean peninsula continued to deepen following threats from a North Korean official saying Pyongyang is preparing “gift packages” to the United States.

Meanwhile, South Korea, one the of the US most important allies in the region, warned that the new missile launches can be expected soon after last Sunday’s nuclear test.

Speaking at a BRICS conference, Russian President Vladimir Putin said that North Koreans will rather “eat grass” before giving up their nuclear program. The leader described the rhetoric of the United States as “military hysteria”.

Russia and China have been pushing this matter to be resolved only with dialogue. "[This crisis] will lead to no good, [...] It could cause a global catastrophe and an enormous loss of life."

Asian stocks were also affected by yesterday’s negative downturn of US markets. The Dow Jones Industrial Average ended lower at 21,753, while the S&P 500 eased 0.75 percent and the tech-heavy Nasdaq Composite ended at 6375.57, falling 0.93 percent.

Tuesday was the first session of this week for US markets, which somehow had to digest the ongoing geopolitical crisis in the Korean peninsula, just like European equities did on Monday.

Sentiment came under pressure following statements from key FOMC members. Fed Governor Lael Brainard said the regulator should be “cautious about tightening policy," as inflation levels remain below Federal Reserve targets.

Minneapolis Federal Reserve Bank President Neel Kashkari said that interest rate hikes could be doing real harm to the economy, and pointed out to low inflation and low employment growth.

“It’s very possible that our rate hikes over the past 18 months are leading to slower job growth, leaving more people on the sidelines, leading to lower wage growth, and leading to lower inflation and inflation expectations,” said Kashkari.